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SCC could topple landmark decision on without-cause dismissals

This week, the Supreme Court of Canada will hear the appeal in last year’s most-talked about labour and employment law case.

Almost a year to the date the Federal Court of Appeal overturned almost 40 years of arbitral law, tomorrow the Supreme Court of Canada will hear Joseph Wilson’s leave to appeal the decision in Wilson v. Atomic Energy Ltd.

Last February, management-side labour and employment lawyers called the Federal Court’s decision in the case involving former Atomic Energy of Canada employee Joseph Wilson a “victory” for federally regulated employers such as banks, telecommunications companies, and certain transport agencies.

It signalled employers in those sectors now had more flexibility in the right to “hire and fire” non-unionized, federally regulated workers.

The appeal court dismissed arguments that federally regulated employees can only be removed with just cause. It reportedly resolved a long-standing divergence in the case law. It is hoped the SCC will resolve the debate once and for all.

Wilson alleged he was unjustly dismissed because he had complained about improper procurement practices on the part of AECL. He refused to sign a release granting him six months’ severance (under the Canada Labour Code, he would have been entitled to just 18 days severance for his 4.5 years on the job). He remained on the payroll until the severance period ended, at which time he brought an arbitral motion under the code alleging unjust dismissal.

An adjudicator found in his favour, determining AECL could not terminate him without cause. The case went to the Federal Court of Appeal, which ruled in favour of AECL.

When the decision came down last year, many labour and employment lawyers said even if it did go to the Supreme Court they would be surprised to see a different outcome since, in their opinion, Justice David Stratas provided a well-reasoned and “exhaustive” decision.

However, others suggest the SCC will spend a lot of time on the standard of review as it tends to give administrative tribunals a principle of deference and will say the standard of review by the Federal Court was not correct.

Stratas applied a “correctness” standard that allows the court to substitute what it thinks is the right interpretation. However, Hendrik Nieuwland, of Shields O’Donnell MacKillop LLP, says since 2008 when it comes to labour relations issues, the SCC has indicated the standard of review by administrative decision-makers should be based on a “reasonableness” standard, which is much lower and allows for inconsistencies in decisions.

“If they ultimately apply the reasonableness standard, I think the chance of success for Wilson goes up exponentially,” says Nieuwland. “The outcome of the standard of review will be important from the perspective of who wins this case. If the SCC thinks the Federal Court of Appeal applied the wrong standard, I think Mr. Wilson wins.”

Wilson’s lawyers argue in their factum to the SCC that the appeal court’s interpretation discourages employers from providing reasons for dismissal: “With the burden of proof on the employee to prove the dismissal unjust in all cases where the employer asserts no cause, a prudent employer would avoid furnishing any explanation.”

Wilson believes he was dismissed in retaliation for whistleblowing on corrupt procurement practices. His lawyers argue the Federal Court decision created uncertainty in a regime that had operated well and shifts the burden of proof to the employee.

Wilson’s lawyer James LeNoury states: “When it comes to reprisal, while the employee bears the ultimate burden of proof, the creation of a right to a just dismissal without just cause legitimizes the employer’s silence when it comes to withholding reasons. Requiring reasons as the proper measure for just cause, on the other hand, ensures an employer’s corresponding silence can reasonably be construed to mean that, at minimum, the dismissal was arbitrary or, where the circumstances otherwise support such an inference, that it was motivated by reasons the employer prefers to conceal.”

Nieuwland says he doesn’t think that argument will fly and that the burden will always remain with the employer.

“If employers don’t give reasons, as they predict, it doesn’t help them — it makes it worse,” he says. “If they don’t give reasons, what a decision-maker is left with is I have reasons from the employee as Mr. Wilson did, and no reasons from an employer. The burden shifts to the employer to respond.”

However, Stratas’ decision does limit the remedies to employees in the federal sector that were available prior to the decision.

“You only get to employ the remedies if the termination is unjust, and if not just cause then we’re limited to bad faith conduct, and it’s hard to imagine that happening in a lot of cases,” he says.

In their factum submission, Wilson’s lawyers also write:

“Mr. Wilson submits as a relevant consideration that AECL commenced its judicial review application prior to conclusion of the administrative proceeding. Joseph Wilson has not yet had the opportunity to present his case and argue that his dismissal was in retaliation for reporting workplace corruption. The intervening passage of time reduces the likelihood that evidence concerning reprisal will be as fulsome — the events grow more distant, memories fade, documents go astray, and witnesses move on. Even in the event of an affirmative finding of reprisal, meaningful remedial consequences are less likely in relation to distant events: personnel and/or organizational changes allow organizations to minimize the relevance of improprieties and culpability.”

For its part, AECL’s lawyers argue the CLC’s dismissal provision mirrors that of provincial employment standards.

It also argues the code’s s. 240(1) unjust dismissal provision does not displace an employer’s right to dismiss without cause. Rather, it simply provides an administrative regime that engenders greater flexibility, efficiencies, and remedial possibilities than what exists civilly to challenge both just cause and without cause terminations.

Appearing at the SCC as interveners in the case will be the Canadian Association for Non-Organized Employees, Federally Regulated Employers — Transportation and Communications, the Canadian Association of Counsel to Employers, as well as the Canadian Labour Congress. FETCO and CACE submit that the dismissal provisions do not prohibit an employer from terminating an employee without cause.

The CLC is putting forward two submissions — first that the Federal Court of Appeal’s decision to apply a correctness standard of review on the basis of “inconsistency” was contrary to established precedent and wrong in principle. Second, that the adjudicator’s interpretation of the unjust dismissal protections of the Canadian Labour Code as precluding an employer from dismissing without cause so long as it provides adequate notice was “not only reasonable but correct.”

It is expected the SCC’s decision won’t be released until later this year, leaving federally regulated employers and their in-house lawyers in a grey area where they should be aware of the risk that terminating without cause can still be challenged under the unjust dismissal provisions of the code.